M&A activity in wealth management is expected to crescendo to the end of 2025. While this is good news for sellers, increased deal flow does not necessarily translate to better outcomes. With more active buyers in the market than ever before, it is crucial for sellers to remain selective and strategic when finding a partner.
The real decision facing sellers in an increasingly efficient economic market is no longer, “What is my firm worth?” but rather, “Who do I trust with my legacy?” The buyer universe is larger than ever and the majority understand where the market is pricing, yet not all buyers are created equal. Some offer stability, others promise upside, and the right choice depends entirely on the seller’s goals, desired outcome and risk appetite.
The Safety Of Scale
Selling to a large, seasoned buyer is like buying a blue chip stock – it is a safe, dependable option. You can slide right into an established client and employee experience and reasonably predict a steady return on your rolled equity. Integration is likely to go smoothly because these firms have done it dozens – if not hundreds – of times. If you are looking for certainty and ease of integration, and are comfortable becoming part of a larger entity, partnering with a larger integrator is likely a solid choice.
The Risk And Reward Of Emerging Buyers
On the other side of the buyer universe are smaller, less seasoned buyers. They may not have a long track record doing M&A, but that does not mean they should be discounted. Rolling equity into an emerging buyer means betting on their ability to grow quickly, since doubling from $5 billion to $10 billion is easier than, say, doubling from $100 billion to $200 billion.
If they are successful in doubling, tripling or even quadrupling the business, the equity you roll could end up being worth more than the cash you took at closing. With that said, you are betting on your belief that they can grow without a more established track record of being able to do so.
You are betting on your belief that they can grow without a more established track record of being able to do so.
The other major tradeoff between a smaller buyer and a more seasoned one is influence. Integrating into a smaller firm typically comes with a greater ability to shape the future of the firm and possibly even participate in C-level roles within the organization.
The Danger Of Overlooking Integration Capacity
Valuation often steals headlines, but integration is where deals truly succeed or fail. A buyer can offer a headline multiple, but if they are already juggling more deals than they can handle or lack the infrastructure to fold in your firm, both your employees and clients will suffer.
It is incumbent on the seller to ask difficult questions ahead of agreeing to merge into a larger firm to ensure there won’t be surprises down the line, such as: How many deals do you expect to close this year? How long did your last integration of a firm that looked like mine take? Who leads the process and what resources do they commit?
Sellers Must Take Ownership Of The Process
At this point in the M&A cycle in wealth management, good buyers all understand the non-negotiables: don’t change fees on existing clients, don’t make huge changes to client portfolios, don’t fire employees and don’t force relocation, to name a few. With these non-negotiables as table stakes, sellers must look a layer deeper and decide whether they value predictable stability or entrepreneurial influence, and how much value they place on immediate liquidity versus a longer-term equity roll.
After years of running a business, it’s unlikely that an owner contemplating a sale has spent time studying the full range of buyer options. Use a competitive process to learn. Narrow down what does not fit. Spend time with leadership teams. Sit down for dinner with potential partners. These experiences often reveal what is truly most important to you.
More potential partners at the table should mean more options, not more confusion.
The best outcomes result from sellers being clear about their goals and disciplined about how they vet potential partners. More potential partners at the table should mean more options, not more confusion.
Jessica Polito is the Founder and Principal of Turkey Hill Management.
